Russia To Buy More Gold, Silver Finishes With A Loss

Gold took a knock yesterday as short-term investors got bored waiting for it to go to $1,700. Instead they saw some positive economic data from the US to China and put their faith into stocks, prompting the FTSE to close at its highest since May 2008 and the S&P to smash through 1,500.

Gold, at the time of writing is down below 1,670 at $1,669. Support is expected to be found at $1,661 during the day. Gold hit its lowest level in over two weeks overnight and we suspect it to test further lows in the short-term. The price below $1,670 does appear to have triggered a small increase in physical sales but we suspect many are waiting for the price to drop further before increasing purchases.

Speaking of physical buying, the Central Bank of Russia said yesterday that it would continue to buy gold bullion. “We are buying metal and will continue to pursue this course,” First Deputy Chairman Alexei Ulyukayev told reporters at Davos. Since 2006, the bank’s gold reserves have more than doubled, from 400 tonnes to 950 tonnes.

Silver futures finished with a loss, the first in eight sessions yesterday. This may have surprised many, particularly the mainstream media who have been asking why the restless metal has been having such a great January and what’s so special about silver investment this month. Silver, as we know follows gold to some extent, seen as a safe-haven by many. Its movement above its 50-day moving average could also not maintain momentum, and some selling was triggered here.

Platinum investment
As we reported last week, platinum is in the running for precious metal of the month which is set to make its biggest weekly gains in over a year. Following on from Morgan Stanley’s perspective on gold, they also see platinum and palladium as ‘distinctly more attractive in the medium term’.

Last week we discussed platinum’s future performance thanks to Amplats’ plans to cut back production. Morgan Stanley said of this: “Such a development would reinforce our long-held view that platinum’s historical premium to gold would eventually be restored, as platinum market fundamentals improve and investor appetite for gold as a hedge against financial market uncertainty gradually fades as the world economy and financial markets finally improve”.

Not all world leaders could pat themselves on the back yesterday. Other data releases yesterday showed private sector output had fallen in France, unemployment up again in Spain (26%, with 60% youth) and retail sales down again in Italy. Markit’s PMI for January was 48.2, indicating there is a further contraction in the Eurozone’s private output.

Is faith in metals waning, as the mainstream media say? I suspect not, we’ve seen this before and we’ll see it again – data suggests the global economy is getting back on its feet so everyone follows that sheepdog. Meanwhile those of us who hold a slightly broader perspective on things keep the price supported until they fancy returning to the fray.

Disclosure: Information published here is provided to aid your thinking and investment decisions, not lead them. You should independently decide the best place for your money, and any investment decision you make is done so at your own risk. Data included here within may already be out of date.